LONDON – Twice in the last 15 years, markets have tried to correct the mistakes and excesses of the Bubble Epoch. Each time, the Fed came back with even more mistakes and excesses. Trillions in new credit… lower lending rates… easier terms… ZIRP… QE… and the Twist!
The gaggle of price-fixers the job of which is to regularly falsify one of the most important price signals in the economy. The idea that the economy can be “improved” by the interventions of a handful of people who have zero practical economic experience and rely on extremely dubious theories to guide their decisions is downright bizarre. Who can possibly believe that this works? It is a huge farce – one that is very dangerous for prosperity and economic progress.
Photo credit: Bloomberg
Over the short run, markets respond to myths. Investors are ready to believe almost anything… for a while. But over the long run, there is death and destruction – a reality outside of what we believe.
No matter how badly investors want asset prices to go up, for example, asset prices don’t always comply. On Wednesday, the Dow sank 560 points in the first few hours of trading. It then recovered half of those losses to end the day down 249 points – for a 1.5% fall.
U.S. crude oil plunged below $27 a barrel – the lowest level in 13 years. The financial media don’t know what to do. Typically, they downplay a bear market as long as they can… explaining the many reasons why the sell-off is “overdone” and why the “bottom” has already been found.
The Wall Street Journal, for example, tells us that the “market’s panic is incongruent” with economic reality. Yahoo! Finance already sees “signs of capitulation.” It offers advice on “how to trade a bear market,” too.
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